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Paycom Makes Solid Progress
Here's our initial take on Paycom Software's (NYSE: PAYC) first-quarter financial report.
Key Metrics
| Metric | Q1 2024 | Q1 2025 | Change | vs. Expectations |
|---|---|---|---|---|
| Production-adjusted revenue | $499.9 million | $530.5 million | +6% | Beat |
| Adjusted earnings per share | $2.59 | $2.80 | +8% | Beat |
| Adjusted EBITDA | $229.5 million | $253.2 million | +10% | n/a |
| Recurring revenue | $466 million | $500 million | +7% | n/a |
Paycom Moves Forward More Slowly
Paycom issued an upbeat financial report for the first quarter of 2025, even though investors had to settle for slower growth rates than they've seen in the past. Revenue came in up a bit over $30 million from year-ago levels, and that caused growth rates to fall from double-digit percentages in the fourth quarter to mid-single-digit percentages. Similarly, growth in adjusted net income was fairly sluggish, although adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) managed to post a 10% gain year over year.
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Founder/CEO Chad Richison's comments were generally similar to what he's been saying in past quarters. The leader emphasized the role that automation is playing in the business and pointed to measures to make Paycom's internal business more efficient as well as greater efforts to boost sales conversions.
Paycom also modestly boosted its full-year 2025 guidance. The company now expects between $2.023 billion and $2.038 billion in revenue for the year, up between $3 million and $8 million from previous projections. Adjusted EBITDA got a much larger boost of $18 million to $23 million, setting a new range of $843 million to $858 million.
Immediate Market Reaction
Even with the somewhat slow growth rate, Paycom managed to exceed lowered expectations among investors. It therefore wasn't surprising to see the stock climb about 2% in the first hour of after-hours trading Wednesday afternoon following the report's release.
Unlike many software stocks, Paycom has stayed relatively close to its highest levels from late 2024. However, the shares remain well below their 2021 peak, reflecting the reset in expectations investors have made as growth has slowed.
What to Watch
Investors will want to keep a close eye on future results from Paycom as the company's clients adjust to changing macroeconomic conditions. Many economists are forecasting a possible recession. If businesses need to cut back on software spending to make ends meet, Paycom could see further pressure on future sales gains.
In the meantime, though, Paycom will have to redouble its efforts to get its sales team to close deals effectively and efficiently. At some point, investors will want to see Paycom's growth accelerate considerably to get the stock moving more assertively in the right direction.
Helpful Resources
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Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Paycom Software. The Motley Fool has a disclosure policy.
